| In order to get the most out of your returns, | | | | term investment. Small investors prefer these |
| without paying a high fee, you need to be | | | | types of stocks because they are not required |
| aware of the different classes of mutual fund | | | | to pay front-end fees and the deferred sales |
| stocks and their advantages and | | | | charge keeps reducing. The other benefit is |
| disadvantages. Mutual fund companies often | | | | that these stocks are automatically converted |
| charge a higher fee when you opt to invest in | | | | into Class 'A' stocks, which have a lower |
| 'high risk high return' stocks. However, | | | | yearly management expense ratio or MER. The |
| paying higher fees does not necessarily | | | | only problem with Class 'B' stocks is that |
| ensure high returns because stock prices | | | | you are required to pay the deferred sales |
| fluctuate on a daily basis. This makes it | | | | fees in case you withdraw the funds before |
| difficult even for professional fund managers | | | | the specified period. Another disadvantage is |
| to predict the future course of a certain | | | | that you do not avail of discounts, since |
| stock. Mutual fund classes show the type of | | | | there are no provisions for a breakpoint. |
| stocks covered under each mutual fund and the | | | | This means that you are not able to reduce |
| fees charged. The most common mutual fund | | | | investment costs even if you increase your |
| classes are A, B, and C. | | | | investment. |
| | | | |
| Class 'A' Stocks | | | | Class C Stocks |
| | | | |
| These types of stocks attract lower 12b-1 | | | | These types of stocks work best for those |
| fees and are considered the best if you are | | | | planning to redeem the stocks within a short |
| planning to keep investment for two or more | | | | span of time. They are beneficial because you |
| years. Investing in such stocks makes you | | | | are not required to pay the front-end fees. |
| eligible to receive discounts, every time | | | | The back-end load is less too, one percent in |
| your investment arrives at a certain amount. | | | | most cases. Even this one percent back-end |
| The amount is selected at the time of buying | | | | load is eliminated if you keep the investment |
| the mutual fund and is referred to as the | | | | for more than a year. Some of the drawbacks |
| 'breakpoint'. Discounts are also offered when | | | | of Class 'C' stocks include compulsory |
| you express the intent of reaching the | | | | back-end load, higher MER, zero discounts and |
| breakpoint within a specified period. | | | | lack of provision for automatic conversions. |
| However, in case you are unable to reach the | | | | |
| breakpoint prior to the deadline, as | | | | In order to benefit from your investments, |
| mentioned in the 'letter of intent', you are | | | | you need to consider a number of factors, |
| required to pay the regular front-end fees. | | | | such as the time for which you plan to |
| | | | invest, the frequency of your investments and |
| Class B Stocks | | | | whether you are liable to withdraw the funds |
| | | | in the near future. The analysis of the |
| These types of stocks are characterized by | | | | benefits and drawbacks of each class of |
| their contingent deferred sales charge and | | | | stocks will help you to select the most |
| are appropriate for investors who have | | | | appropriate investment option, based on your |
| limited resources and are looking for long | | | | specific needs and preferences. |